Maternity, Paternity or Adoption Leave in the Local Government Pension Scheme (LGPS) Your period of maternity, paternity or adoption leave has just been approved but are you aware how this will affect your LGPS pension? This leaflet tries to explain the affects and the options open to you following this period of leave. During any period of: paid maternity leave (including any period when only Statutory Maternity Pay is paid) paid adoption leave (including any period when only Statutory Adoption Pay is paid) any unpaid maternity or adoption leave during the first 26 weeks of absence, and statutory paternity leave your LGPS benefits will continue to build up as if you were working normally on full pay. You must continue to pay pension contributions on the pay, if any, you are receiving. Any period of unpaid maternity or adoption leave beyond 26 weeks will not automatically count towards your pension. Instead it will count as a break in service and the period of absence will not be counted in your pension membership. You can choose to pay back the pension contributions you have missed for the period of unpaid absence, so you will not have a break in pension membership. How much is the cost to pay back the pension contributions for the period of absence? The cost of paying back is based on the last rate of pay you received ignoring any increase in pay due to working a Keep in Touch day. Your employer should be able to provide you with the details of the cost once you have returned to work. Some of the main points to consider are: The cost of the contributions for the unpaid period may be based on a reduced amount of pay, but the membership will be counted on the contractual arrangements immediately before the absence began; The more your pay increases between your period of absence and date of leaving, the bigger the benefit; You have 30 days after returning to work, or any longer period that your employer may allow, to send your decision on paying the pension contributions to your employer; If you do not return to work, you will not have the option of repaying the pension contributions for the unpaid period. Here is an example to help explain the pros and cons of paying the arrears. Miss Smith goes on maternity leave on 1 January 2010 and has agreed to return to work on 1 November 2010. She receives some form of pay for the first 39 weeks (up to 30 September 2010) meaning that the period 1 October 2010 to 31 October 2010 is unpaid maternity leave. During the period 1 January 2010 to 30 September 2010, Miss Smith’s employer must deduct pension contributions from the pay she receives and this period therefore counts as pension membership. On returning to work, Miss Smith’s employer will give her the option of paying the arrears of pension contributions for the unpaid maternity leave. Assuming Miss Smith was only paid Statutory Maternity Pay1 on the last day of paid leave, the cost amounts to £32.08 for 1 month’s pension membership (£124.88 per week x 4 weeks 3 days x relevant pension contribution rate of 5.8% = £32.08). * The contribution rate applied will be the rate you have been paying. Miss Smith would have to compare the benefit of 1 month of pension membership against the cost of £32.08. Unfortunately, no one will know the exact benefit of paying back the membership until they leave employment, so some guess work will be needed. Once you have made your decision, your employer will inform Pension Services at Oxfordshire County Council2, who will in turn confirm the effect your decision has had on your pension. You should expect this within 6 weeks of Pension Services receiving details 1 2010/11 weekly Statutory Maternity Pay (SMP) is £124.88. from your employer. Can I opt out of the scheme? This is a common question, especially from employees just about to start maternity, paternity or adoption leave. You can opt out of the scheme, but you will need to contact your employer who will provide you with a form to complete. But you will need to consider the benefits of being a member of the scheme, such as: Tax relief on pension contributions paid; Lower rate of national insurance contributions; Life cover of 3 times your actual pay, even when on unpaid leave; and Being part of an employer assisted final salary pension scheme. What if I am paying extra? If you have entered into a contract to: Buy extra pension (called Additional Regular Contributions); Count pre 6 April 1988 membership for a surviving nominated co-habiting partner’s pension; Buy additional LGPS membership (called Added Years); or Buy Prudential death in service cover; you must continue to make the contributions you had agreed to in your contract, as if you were not on leave. If you fail to make arrangements for the contributions to be made, the contract will stop. If you are paying Additional Voluntary Contributions (AVCs), your contributions will be deducted when you are receiving pay. If your pay no longer covers the contribution agreed, the contributions will stop and you will need to speak to Prudential about any future contributions. What if I have more than 1 job? You will need to contact your employer about how the maternity, paternity or adoption leave will affect each separate employment. 2 Pension Services are the administrators of the pension fund and are responsible for recording your membership, calculating and paying your pension. Contact Details If you have questions about: The contributions you are paying; The amount of your paid allowances; The amount of pension contributions to buyback membership; or Timescales to make your decision; You should contact your employer. If you have questions about: Confirming membership; Calculating your pension benefits; or The LGPS; You should contact Pension Services by: Telephone on 01865 797124 or 01865 797130; E-mail on pension.services@oxfordshire.gov.uk; Fax on 01865 783108; Writing to Pension Services, Oxfordshire County Council, Unipart House, Garsington Road, Oxford, OX4 2GQ. If you have questions about your Prudential AVCs or death in service cover, you should contact Prudential by: Telephone on 0845 600 0343; or Writing to Local Government AVC Department, Prudential, Stirling, FK9 4UE.